![]() These options are issued by big investment banks and every time they sell one they have to buy some amount of the underlying stock as a hedge in case they have to pay out. “Basically you are allowed to buy the stock at the current price at a later date. He explained that, in addition to short bets, traders might use a “call” option, a bet that the stock will go up. ![]() “So has enough action that just their decision to buy the stock might send it up,” Karla said. This increased buying activity, along with a not-catastrophic earnings report and the installation of Ryan Cohen, the cofounder of, as a GameStop board member (Chewy is a stock market success story), sent stock prices up, which likely spooked short sellers into cutting their losses on GameStop and caused them to cover their shorts before things get worse. In recent days, WallStreetBets users have been buying GME like crazy, at prices between $4-8. “GameStop is the most heavily shorted company on the market,” he added, in a video that largely discussed why he believed GameStop is a solid company but also touched on the short squeeze possibility. ![]() Most notable among these is a user named DeepFuckingValue, who posted screenshots of them buying more than $50,000 worth of GameStop stock when it was valued at less than a dollar in 2019.ĭeepFuckingValue, who goes by the name RoaringKitty on YouTubepredicted back in August that GameStop stock would also skyrocket at some point: “GameStop is one of the most compelling, asymmetric opportunities today,” they said in the video. So, essentially, people on WallStreetBets along with several YouTube and TikTok investors guessed as long as a year ago that if they bought shares of GameStop at a low price, the short sellers would eventually be forced to cover their short en masse, which would drive the price up. “We can see that of the 79,519,042 shorted shares, 68% or 54,168,330 of all shorted shares are shorted on margin.” “There is likely not an original GameStop issued share left on the market,” Redditor gardeeon said on WallStreetBets. ![]() According to the posters on WallStreetBets, this has allowed its traders to take the stock hostage. One of GameStop’s big problems is that it has negative float, meaning it has issued more shares than are actually available. Karla, editor of the business newsletter Contention, told Motherboard via Signal. “If a stock has heavy short interest and gets squeezed, the mass move to cover can bid the price up even further, making the squeeze even worse and setting off a chain reaction that can cause rapid price increases,” J.E. When this happens en-masse, investors who have bet on a short are basically cutting their losses and forced to buy up the stock, which can send prices even higher. If the stock price goes up, they have to pay that higher price and thus have lost money. Because they've already sold the stock (that they didn't have), they still have to "cover" the amount of shares they've sold. The act of buying the stock back is called “covering.” If the stock price rises instead of falls before a trader can cover their bet, they’re getting squeezed on their short. When the price drops they purchase the stock back and return it to who they borrowed it from. To accomplish that a seller typically borrows stock from someone, usually an investment bank, then sells it. This means that investors sell stock they don't have, then hope the price goes lower so they can buy the amount of shares they sold at a lower price at a later date. GameStop was a major target for financial firms who were shorting the company-many investors on the WallStreetBets subreddit believe that a few investment firms have shorted millions of shares of GameStop. This has seemingly happened because of some relatively complex stock market machinations. ![]() It closed hundreds of stores in 2020 and owes almost half a billion dollars in short- and long-term debt.Īnd yet GameStop's stock has gone through the roof. It’s a brick-and-mortar store in a business that’s increasingly moving to digital sales. In general, GameStop hasn’t been doing well. In August, members of the subreddit began buying up shares in GameStop and several offbeat investors started to tout the stock's virtues. Wallstreetbets is a subreddit filled with chaotic investment advice and surreal memes. ![]()
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